Syllabus B6h]
Describe the form and contents of working papers and supporting documentation.
All documentation should be retained in an audit file
The audit file will follow the structure below:
Planning
Audit work carried out on each section of the financial statements [e.g. Non Current Assets, Inventory]
Completion and review
Auditors must document
What items were tested
Who did the testing
When was the testing
Who reviewed the work and when
Discussion of all significant matters with management must also be documented
Types of Audit Documentation
Includes
Planning Documentation [Strategy, plan, risk analysis]
Audit programmes
Summary of significant matters
Letters of confirmation / representation
Correspondence
Permanent and current audit files
Permanent audit files contain information of continuing importance to the audit.
The permanent file will include
Names of management, those charged with governance, shareholders
Systems Information
Business and Industry background
Title deeds
Contracts
Copy of the company's legal constitution
Board minutes of continuing relevance
Previous years' signed accounts, analytical procedures and management letters
Engagement letters
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Current audit files
contain information which is relevant to the current year's audit.
They contain:
Financial statements
Accounts checklists
Management accounts details
Reconciliations of management and financial accounts
A summary of unadjusted misstatements
Report to partner including details of significant events and misstatements
Review notes
Audit planning memorandum
Time budgets and summaries
Representation letter
Management letter
Notes of board minutes
Communications with third parties such as experts or other auditors
Current audit files also contain working papers covering each audit area
These should include the following:
A lead schedule including details of the figures to be included in the financial statements
Problems encountered and conclusions drawn
Audit programmes
Risk assessments
Sampling plans
Analytical procedures
Details of substantive tests and tests of control
May 14, 2022/ Steven Bragg
A permanent file is a set of records that serves as an ongoing reference for an organization's external auditors. The information in the file is intended to be accessed repeatedly in successive audits to assist the audit team in the conduct of their tasks. The file may contain the following documents: Accounting policies Articles of incorporation Bylaws Chart of accounts Director list History of the client organization Internal controls documentation Organization chart Prior year's audit reportWhat is a Permanent File?
In the case of recurring audits, some working paper files may be classified as permanent audit files which are updated currently with information of continuing importance to succeeding audit, as distinct from current audit files which contain information relating primarily to the audit of a single period.
A permanent audit file normally includes :
- Information concerning the legal and organizational structure of the entity. In the case of a company, this includes the Memorandum and Articles of Association. In the case of a statutory corporation, this includes the Act and Regulations under which the corporation functions.
- Extracts or copies of important legal documents, agreements and minutes relevant to the audit.
- A record of the study and the evaluation of the internal controls related to the accounting system. This might be in the form of narrative descriptions,questionnaires or flow charts, or some combination thereof.
- Copies of audited financial statements for previous years.
- Analysis of significant ratios and trends.
- Copies of management letters issued by the auditor, if any. Record of communication with the retiring auditor, if any, before acceptance of the appointment as auditor.
- Notes regarding significant accounting policies.
- Significant audit observations of earlier years.
The current file normally includes :
- Correspondence relating to acceptance of annual reappointment.
- Extracts of important matters in the minutes of Board Meetings and General Meetings as relevant to audit.
- Evidence of the planning process of the audit and audit programme.
- Analysis of transactions and balances.
- A record of the nature, timing and extent of auditing procedures performed, and the results of such procedures.
- Evidence that the work performed by assistants was supervised and reviewed.
- Copies of communication with other auditors, experts and other third parties.
- Letters of representation or confirmation received from the client.
- Conclusions reached by the auditor concerning significant aspects of the audit, including the manner in which exceptions and unusual matters, if any, disclosed by the auditor’s procedures were resolved or treated.
- Copies of the financial information being reported on and the related audit reports.